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What is the Evidence on ‘Graduation’ Programmes?

23/09/2013

Development Pathways

How easy is it to ‘graduate’ people out of poverty? In recent years, there has been a wave of so-called ‘graduation’ programmes in developing countries, all of which are derived from BRAC’s Targeting the Ultra-Poor (TUP) programme in Bangladesh. Claims are made by these schemes of a high proportion of participants ‘graduating’. But, what does the evidence tell us about whether participants really do ‘graduate’ out of poverty. BRAC has produced a couple of good quality interventions that shed some interesting light on this question.

BRAC’s evaluation has shown that, in the TUP programme – using 2007 values – the average increase in earnings from income generating activities among participants was only Tk.1,755 – or US$26 – per year, with annual expenditure by households increasing by Tk.2,400, or US$36 (Bandieraet al. 2012).. This translates into a tiny per capita increase in expenditure of around US$1 per month. To put this into perspective, average annual incomes in Bangladesh in 2007 were around Tk.107,000 while the poverty line in 2007 was Tk.17,784 per capita per year. So, the increase in household expenditure from TUP was only 4.5% of the value of the poverty line, which is almost insignificant. 

This increase in income comes at a high cost to families. To achieve the average increase in household expenditure of US$36, families have had to work an additional 765 hours per year (Bandieraet al. 2012). This corresponds to just over US$0.04 of additional expenditure per hour of work, equivalent to around US$0.35 for an 8 hour day. This does not suggest a particularly productive increase in labour. Indeed, some of the increase in labour would appear to be from children.

Although the data is not reliable enough for a strict comparison, it is interesting to note that the increase in annual household income from Bangladesh’s Old Age Allowance – which pays recipients only Tk.300 per month (or around US$4) – was found by Rahman and Choudhury (2012) to be Tk.4,000, significantly higher than the increase in income reported by the TUP programme (at Tk.1,755). It suggests it would be preferable for TUP beneficiaries to be in regular receipt of a transfer, even one as low as the Old Age Allowance.

There are indications that the sustainability of gains from TUP is not assured for all participants. Among those who entered the programme in 2002, 52% experienced a decrease in assets between 2005 and 2008 (Krishna et al. 2010). This is probably because former participants are still subjected to the same risks and shocks as before and, without access to a continuing social protection transfer, their only option, when faced with illness or some other contingency, is to draw down on their assets (c.f. Huda 2012). It also needs to be borne in mind that these participants have the advantage of benefiting from BRAC’s health programme, which will have reduced the impact of health risks on their incomes. Those without similar access to good quality health services are almost certain to find that their assets fall away even more quickly since they will have minimal protection against illness.

A further question is whether the TUP asset transfer programme is a cost-effective option for donors? The average cost of the programme per household was around US$600 per in 2007, spread across two years (Bandiera et al. 2012). Yet, as noted above, the increase in annual income from income generating activities was only US$26. It would, therefore, take around 23 years to recover the investment. In fact, it is almost certain that a higher income could be generated for beneficiaries if the US$600 were placed in a savings account and they were provided with the annual interest. Even at an interest rate of 5% per year – which is low for savings in Bangladesh – beneficiaries would receive US$30 per year (an increase in income of US$4 over TUP), while maintaining an asset in the bank valued at US$600. 

Conclusion

The TUP programme does provide benefits to families that go beyond improved incomes, such as an increase in assets, more self-confidence and a greater ability to manage livestock. It could, indeed, be strongly argued that many of the families are more resilient than they were before they entered the programme. And, of course, some participants – most likely the more entrepreneurial – will have done much better than the average.

However, it is clearly completely inaccurate to claim that the participants of TUP have graduated from poverty. They are evidently still extremely poor and highly vulnerable to shocks that can throw them back into deeper poverty. The majority are likely to remain as prime candidates for social security schemes. To be fair to BRAC, they do not claim that TUP participants have graduated from poverty: their aim is to ‘graduate’ them into microfinance. It is others who have begun to believe and claim that participants in ‘graduation’ schemes – which are really just micro-enterprise projects – are graduating out of poverty.

In reality, if the gains made by TUP participants are to be maintained once they leave the programme, it is essential for them to continue to receive a regular cash transfer, as part of a national social security scheme. Bangladesh could follow the model of South Africa, which enables most families with children to access a child grant until their children reach 18 years of age. These grants not only help recipients to engage more actively in the labour market and income generating activities, they also protect them against the effects of shocks such as illness: if they become ill and their incomes fall, they are less likely to draw down on their productive assets. (See Williams 2007 for more information).

“Graduating” from poverty is incredibly difficult and few people can achieve it in just a few years (or even in decades). And, even if they do, they still remain vulnerable to falling back into poverty. As Huda (2012) argues, an effective and comprehensive national social security system is the only means of ensuring that families can have a minimum income below which they cannot fall. And, such an income provides them with a platform from which they can more effectively engage with the labour market. Programmes like BRAC’s TUP provide poor women with important livelihoods support: but these women remain extremely poor once they leave TUP. If BRAC’s – and donors’ – investment is not to be lost, they need to be able to continue to access social security benefits. The onus is on the Bangladesh government to put these benefits in place.

References:

Bandiera, O., R. Burgess, N. C. Das, S. Gulesci, I. Rasul, R. Shams and M. Sulaiman (2012) Asset Transfer Programme for the Ultra Poor: A Randomized Control Trial EvaluationBRAC, Challenging the Frontiers of Poverty Reduction (CFPR) Working Paper No. 22.

JustKidding320x163Huda, K. (2012) Graduating Into – Not Out of – a National Social Security System. Pathways Perspectives Issue No. 5, Development Pathways: UK.

Krishna, A., M. Poghosyan and N. Das (2010) How much can asset transfers help the poorest? The five Cs of community-level development and BRAC’s Ultra-Poor Programme. Brooks World Poverty Institute (BWPI) Working Paper 130, University of Manchester.

Rahman, H. Z. and L. A. Choudhury (2012) Social Safety Nets in Bangladesh, Volume 2: Ground Realities and Policy Challenges: Process, Coverage, Outcome, Priorities.  Power and Participation Research Centre (PPRC) and United Nations Development Programme (UNDP): Dhaka.

Williams, M. (2007) “The Social and Economic Impacts of South Africa’s Child Support Grant.”Research Paper No. 40. Cape Town. South Africa: EPRI.

 

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